It is January 1st, 2014 and Oscar D’Souza has decided to start a new business. He wants to forecast the first year’s Income Statement and Balance sheet. He believes the assumptions below are reasonable – and wants you to assist him by creating the forecasted statements. You agree. Please construct an Income Statement and Balance Sheet from the information provided below. First year sales will total $100,000 Gross margins will be 50% Operating margins will be 20% Accounts Receivables will be about 15% of sales Inventory will be 12% of sales Accounts Payable will be 5% of sales Accrued expenses payable will be 7% of sales The Bank of Connecticut will provide a loan of $30,000. The annual interest will be 8%, compounded annually. Interest only payments are needed – until the loan is due in 5 years, where a balloon payment for the full balance must be paid. The combined federal and provincial tax rates will be 30% Capital equipment purchases will be made at the start of the year. These will total $35,000. These will depreciate at 10% per year D’Souza wants ending cash to be $24,500; he feels he needs this on hand at year-end D’Souza will provide any other capital needed in the form of equity financing

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 7P

See similar textbooks

Related questions

Question

It is January 1^st, 2014 and Oscar D’Souza has decided to start a new business. He wants to forecast the first year’s Income Statement and Balance sheet. He believes the assumptions below are reasonable – and wants you to assist him by creating the forecasted statements. You agree. Please construct an Income Statement and Balance Sheet from the information provided below.

First year sales will total $100,000
Gross margins will be 50%
Operating margins will be 20%
Accounts Receivables will be about 15% of sales
Inventory will be 12% of sales
Accounts Payable will be 5% of sales
Accrued expenses payable will be 7% of sales
The Bank of Connecticut will provide a loan of $30,000. The annual interest will be 8%, compounded annually. Interest only payments are needed – until the loan is due in 5 years, where a balloon payment for the full balance must be paid.
The combined federal and provincial tax rates will be 30%
Capital equipment purchases will be made at the start of the year. These will total $35,000. These will depreciate at 10% per year
D’Souza wants ending cash to be $24,500; he feels he needs this on hand at year-end
D’Souza will provide any other capital needed in the form of equity financing

Expert Solution

Step by step

Solved in 4 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.